New Mexico Offered Free Childcare and Reduced the Poverty Rate

According to the U.S. Department of Labor, families within the median income range spend between 8.9% and 16% of their income on childcare. However, lower-income families may spend even larger percentages on these services. It's reported that there are also times when they simply don't have enough money to pay for it. After studying how this impacts both parents and providers, New Mexico made childcare free for many families. The effort ended up lifting 120,000 people above the poverty line.

The free childcare policy in New Mexico has its origins during the pandemic. “COVID created a really enormous moment for childcare,” Hailey Heinz, deputy director of the University of New Mexico’s Cradle to Career Policy Institute, told The Guardian. “We had somewhat of a national reckoning about the fact that we don’t have a workforce if we don’t have childcare.” Boosted by increased federal funding, the state offered free childcare for families earning up to 400% of the federal poverty level (approximately $124,000 for a family of four), which covered about half of the children in New Mexico.

Two years later, the program stopped being supported by pandemic federal relief. Instead, the Early Childhood Trust Fund, set up in early 2020 and powered by oil and gas revenue, as well as a percentage of the Land Grant Permanent Fund, filled the gap. Following an initial investment of $300 million, the fund was reported to have grown to $9 billion by the end of last year.

With these actions, New Mexico raised wages for childcare workers, lifting many of them out of poverty. Between 2020 and 2024, the amount of educators and caretakers in poverty, many of whom are women of color, fell 11.4%. As for parents, getting free childcare not only took off the pressure of this expense, but it has also allowed them to study and work, amplifying their opportunities and budgets.

The efforts are based on the Heckman Curve—economist James Heckman's assertion that investing early in children yields the greatest returns, as it leads to lifelong success and reduced societal costs across multiple generations. Since the first group of kids who got free childcare is only about to start school, the changes may not be noticeable at first, but its backers are confident that its most potent effects will be noticeable in the future.

“This is a big investment that we know is going to pay off,” says Elizabeth Groginsky, cabinet secretary of New Mexico’s early childhood education and care department. “The governor has seen that this investment in our human capital is as important as all the investments we’re making in our infrastructure.”